I’m very happy to be debating this interesting topic with Micro. MIG, I again commend you for running this tournament and am grateful for understanding that this debate is slightly behind time.

Points of Note

Obviously, I’m not to make arguments this round, nor will I be having rebuttals in R2, but it’s important to make crystal clear a key point in this debate to the reader.

We are not debating whether the minimum wage is economically harmful . The word ‘is’ reflects a more holistic, sweeping view; on the whole, all things considered, is the wage harmful? This distinction is fairly important, although obviously this debate will have clashes on the economics side of things - for instance, one may see monopsony become an issue in this debate on the economics side.

Just to be clear to readers, we’re discussing a single minimum wage. We’re not discussing variations, such as a minimum wage per occupation.

My other note is that Micro states ‘economy’ to be ‘A US national economy...’. While it is useful to have constraints on scope, evidence from other countries with the minimum wage and the subsequent impacts is permissible. Furthermore, understanding factors that could affect the impacts of the minimum wage is important, and factors may differ between countries.

I hope I these points serve as a clarification to the reader as to the scope and weighing of the debate. They are by no means arguments and should not be treated as such.

Also, this is somewhat a rerun of a previous debate. I'll be saying the exact same thing for my first arguments, except I will include some useful economic graphs.

Thank you, logic, for agreeing to debate this. It is a pleasure to break away from the usual debates on religion that I normally do. I will show that on balance, the minimum wage is harmful to society as a whole.

This is take 2 because I was on vacation and forfeited the last debate. Thank you, MIG and logic for letting the redo happen.

"One of the prime reasons for this drastic employment drought is the mandated wage hikes that policymakers have forced on small businesses. Economic research has shown time and again that increasing the minimum wage destroys jobs for low-skilled workers while doing little to address poverty." (http://epionline.org.........;)

The reason is simple: When the minimum wage gets a boost, employers cut down on hiring teens who normally fill lower-priority positions (i.e., taking out the trash). Nearly half of all minimum wage earners are teenagers or young people still linving with their parents.

For every 10% increase in the minimum wage, there was a 4.6-9.0 percent decline in teen unemployment. (http://epionline.org.........;)

Increase in minimum wage always results in higher prices. Because of the high price, many leftist organizations have argued to increase the minimum wage--some, like the Socialist Party USA have argued that they want the minimum wage to be $15. However, the logic behind that is seriously flawed.

"In a free market, demand is always a function of price: the higher the price, the lower the demand. What may surprise most politicians is that these rules apply equally to both prices and wages. When employers evaluate their labor and capital needs, cost is a primary factor. When the cost of hiring low-skilled workers moves higher, jobs are lost. Despite this, minimum wage hikes, like the one set to take effect later this month, are always seen as an act of governmental benevolence. Nothing could be further from the truth." (http://www.lewrockwell.com...;)

When a worker who is forced to be paid $7/hour but works at quality rate of only $3/hour, companies lose $3 every hour that worker works. The result is an increase in overal unemployment.

"The federal increase from $4.25 to $5.15 costs California families an average of $133 more per year for the goods they normally purchase. Since higher-income families spend more, they would pay more in absolute terms than lower-income families: up to $234 per year compared to $84 per year." (Quoted in Ron-Paul vs. RoyalDalphinhttp://www.debate.org.........;)

3. Overal unemployment increases

The graph above charts unemployment vs. minimum wage. The reason for this is very simple: Because with minimum wage, companies have to pay more employees meaning that they have to layout workers to stay on budget.

4. Increase in poverty

Minimum wage can be directly correlated to the increase in poverty. The NELP suggests that increase in minimum wage helps lift Americans out of poverty. However, upon closer inspection, this claim cannot pass the test of rigorous research. CNN reports:

"[R]esearch published last year in the Southern Economic Journal, a study funded in party by the Employment Policies Institute, found no evidence that these state minimum wage increases reduce poverty rates. The authors, from Cornell and American universities, suggest that some wage gains were flowing to higher-income families rather then the intended beneficiaries."

"There is even more important effect to account for:a decrease in employers' demand for the less-skilled and less-experienced. Those employees who receive a minimum wage increase may be better off, but those who lose their job because they're now more expensive to employ are most certainly worse off.""Research from economist David Neumark, Mark Schweitzer and William Wascher found a higher minimum wage results in a net increase in proportions of families who are poor or near-poverty -- meaning that the "losers" from a minimum wage increase outnumbers tthe 'winners.'"

"The way it is supposed to work is that people do not choose to start families until they can earn enough to support them. Lower-wage jobs enable workers to eventually acquire the skills necessary to earn wages high enough to support a family. Does anyone really think a kid with a paper route should earn a wage high enough to support a family?"

Thanks to Micro for his post. I'm going to avoid going into rebuttals as per the rules, despite wishing to tear his case apart. Rebuttals will only be in the form of arguments. Also, remember this is ‘on balance' , not just economics. Also, I'm presuming a certain amount of economic literacy on the part of the audience.

Monopsony

Pro's case is a nice exposition of neoclassical economics when given free market conditions. Unfortunately, this isn't always the case. Take a monopsonist – a single buyer of labour. Monopsonies tend to be common in small towns, where only one large firm provides the majority of employment. [1] Due to this control over employment, monopsonists can control the price they pay compared with buyers in more competitive markets.

While pure monopsonists are rare, monopsony power is quite common. Take supermarkets for example. In Australia 2 monopsonists – Woolworths and Wesfarmers, control 80% of grocery sales. This allows them great power in dictating terms to suppliers (in this analogy, suppliers are like minimum wage workers).

Now, monopsony means that workers are not being paid an amount they would in a competitive market, which seems to be the standard Pro holds to (more on this later). A rise in the minimum wage eliminates monopsonist power and reduces the degree to which exploitation occurs, up to the point where the marginal cost of labour (MCL) = marginal revenue product (MCP) , so profits still occur for the former monopsonist, merely that they can't exploit workers by paying them below what would be payed in a competitive market.

In fact, in the case of a monopsony the minimum wage increases employment. The below diagram (depicting various minimum wage regimes) illustrates how monopsonies operate.

Pro's case is very strongly dependent on the idea that the minimum wage will increase prices if additional costs are passed on (instead of the cost being absorbed or redundancies occurring) , resulting in less demand.

Unfortunately Pro's case presumes a degree of elasticity. Many industries have inelastic demand. If I had control over the water supply then if I raised prices you would still demand water – you need it to live. Demand is close to perfectly inelastic. The same applies to supermarkets and essential goods and services – the minimum wage will hardly affect demand because demand is inelastic.

From here it's clear to see that conspicuous consumption would likely reduce as a percentage of overall spending. Given that conspicuous consumption is precisely what drives a materialistic culture, a reduction is conspicuous consumption could be helpful. I won't push on this topic though as cultural preferences are subjective; readers can decide if a reduction in conspicuous consumption is a good thing. Nevertheless, Pro is still incorrect to state that higher prices necessarily equate to lower demand.

Big increases vs. small decreases

While not strictly the case, the law of diminishing returns applies to minimum wage workers. One often finds less utility in each additional dollar they make. To use an extreme example, if I had a billion dollars I'd get a lot. I'd value what I got from that billion quite highly. Another billion wouldn't get me quite so much.

Basically, a small increase in a worker's wage (as minimum wages do; I'm not advocating for a large wage increase – see second regime minimum wage [2]) is worth a lot more to them than any loss if a price is passed onto consumers. Increased costs in areas like luxury goods may slightly lower people's total utility yet it enables minimum wage employees to vastly increase their utility. Essentially, total happiness is increased, which is a good thing.

Marginal Productivity

Pro states "When a worker... works at quality rate of only $3/hour" he's making the mistake of presuming that an employee's output isn't changeable, which isn't correct; 2 workers on the same wage may have complete different levels of productive output. This is relevant to the minimum wage because better paid staff who feel their wages are likelier to be healthier, and feel more respected and motivated, leading to more productivity. This is backed up by various economic process theories. Edwin Locke studied this phenomena and found that higher wages increased productivity by an average of 30% [3, 4]

The point is thus – there's a point to which it doesn't matter what the actual effects of the minimum wage are. If many people believe the minimum wage is fair, just and beneficial then they'll work harder. A 30% increase in productivity is most definitely worth a few potential job losses in some circumstances (not all, ie. Monopsonistic competition).

One's psychological viewpoint is most definitely worth consideration by itself. When it increases productivity it's even better. Need I mention a similarity to the Placebo Effect?

Are Market Prices Always Optimal?

As mentioned before, Pro has adopted a fairly neoclassical economical approach. As Ross Gittins states in [5] "This conventional economics reduces all economic activity to that which happens within markets. It further narrows the operation of markets to the setting of prices, assuming movements in relative prices are the primary thing influencing the behaviour of producers and consumers". Put quite simply, Pro views price as a critical factor in economics (nevermind that people tend to overemphasise the importance of quantifiable things) , and henceforth supports the price mechanism as ideal. Is this always the case?

No. Negative externalities are an example of the price mechanism failing to produce an ideal result, because externalities (in this case negative) are not accounted for because the cost is not incurred by a buyer or seller of the good or service causing the cost. See http://tutor2u.net...... ; near page bottom.

Firstly, let me apologise for the colour of the picture. The DDO editor is having a problem with it.

What's this all about? Pro can't simply view the price mechanism as always ideal. Things like behavioural economics are important to consider. Furthermore, there are good reasons to doubt that price movements have as much of an impact as Pro speculates.

Empirics

It's difficult to cover every point to do with the minimum wage in 8000 characters. I'll cover empirical evidence more in later rounds. Empirical evidence is obviously sometimes questionable though because we can't control all the variables. Nevertheless, there is quite a bit of empirical evidence supporting the minimum wage. More in my 3rd round.

However, let's discuss Pro's 2 graphs – a prime example of misinterpreted statistics. That 2nd one looks pretty imposing doesn't it? Increases in the minimum wage seemed to coincide with massive unemployment increases. Maybe it was the minimum wage that caused this. Pro even states he thinks this was the case "The reason for this is very simple; Because with minimum wage..."

I humbly propose another explanation – the Global Financial Crisis and subprime mortgage housing issues. This also happened at precisely the same time Pro's graph depicts rising unemployment. Massive knock on effects from these crises and such (as well as the effect on psychology and such) led to less money to spend on workers of all levels. Massive redundancies, bailouts, stimuluses etc.

Pro believes rising unemployment to be primarily because of the minimum wage rises in his graph. I believe it's explainable by the GFC. I'll let readers decide.

Thanks to Micro for posting instead of simply letting the time drain away – it's a kind touch that indicates thoughtfulness and acknowledges the presence of myself, as well as the audience. I commend Micro for his gracious manner of forfeiting.

All that said, I believe the vote to be clear, as demonstrated by my opponent's clear words last round. If need be I can elaborate more deeply in R4, but I don't think I shall need to.

To anybody reading this, if you're interested in my case or simply wish to challenge it, perhaps we could debate it at some point. Simply inquire in the comments or send me a message if you are interested. I would note to the reader whom is still reading that various points of interest were not properly expressed in this debate. I need merely point to various bits of empirical evidence and the quagmire surrounding such evidence to give an example.

Thanks to Micro for the debate, no matter it's short longevity, and thanks to MIG for hosting this tournament.

Well, I fear there is little more to say at this point. The vote is clear, the arguments unrefuted etc.

Micro, should you wish to debate this at some future point I'd be happy to do so. As to others interested, I'm happy to debate this. Any challenger should be wary though - R2 was not the full extent of my arguments!

Finally, thanks to the voters who vote, and the readers who comment. And with that, I'll let this debate go into the voting period.